It’s been interesting of late. I’ve probably talked to two dozen orthodontists over the last few months about their anxiety over a shrinking orthodontic practice. They tell me case starts are down, new patients are down, conversion rate is low… and they can’t figure out why. In all these cases where I’m asked for advice on such things I ask the same questions – let me see your P&L, how many new patient visits do you have, how many starts a month, total collections and production for the last couple years, what’s your fee schedule, what’s your financing, and on and on. I’m starting to see a pattern and it’s terribly interesting so I thought I’d share it here in a list of things I generally see in practices experiencing stagnation or shrinkage:

1. A huge mismatch between the fee schedule and the actual collections per case
2. Disbelief on the part of the orthodontist
3. Terribly expensive supplies and lab bills
4. A great many expensive monthly vendor subscriptions
5. A weak value proposition and marketing position
6. Very few case starts and the Dr. wants to make this about conversion rate

These are big issues and by the time doctors contact me they are experiencing a reduction in COLLECTIONS which means it’s actually worse than they think because collections is a trailing indicator of production. This means that your reduction in collection is due to what you did last year and the year before and if you want to increase collections then it will take action now but you’ll only see the results next year and the year after. This means it’s time to take decisive action. NOW! Let’s look at each thing on the list and discuss the problem and possible implications in turn.

1. A huge mismatch between the fee schedule and the actual collections per case
   • Usually I see fees in the stratosphere on the fee schedules doctors send me. It’s actually kind of amazing. In addition to being very high the fees are extremely complicated and take up pages. No wonder it takes their TCs more than an hour to see a NP, it would take half of that time to figure out what to charge.
   • The problem is that when I take the total collections (actual money that hits the bank account) and divide it by the number of starts for the same period then I usually find a much lower dollar amount per case than indicated by the fee schedule. Now you could argue that it should be production not collections because collections lag – but production is just blue sky and that’s my point. You could argue that phase I and other dinky cases throw this average collections per case off – so take those out if you need to. However you slice it the issue here is that what you are collecting per case is generally not what you think it is. This either means that you’re only doing 6 month cases (the ones with the lowest fees on your fee schedule) or you’re doing a lot of discounting to sell enough cases to get by. I’m betting it’s the latter. Sometimes the doctor knows there is discounting going on but doesn’t realize the extent of the impact it has on collections and sometimes the doctor is unaware – both are big issues.
   • In a mature practice there isn’t much difference between production and collection – less than 5% usually so you should use collections divided by case starts instead of production. In a strongly growing practice you don’t care what the number is because you’re growing! In a shrinking practice you need to figure out what is going on and your production fell last year and that is causing your collections to shrink this year so I’d still divide the collections by the number of starts in the same period to get a better sense of what’s going on because you are already behind the 8 ball. Basically you need to stop worrying about looking good and defending what you do and start trying to get a realistic view of what is going on. NOW. Using collections instead of production is the way to do that.
   • If the math shows you that you are, in reality, charging a much lower fee than you and everyone in your community thinks you are charging then why not change your fee to that lower price, market it, get more patients and starts because of the more attractive fee and make more money with less stress? You’re doing it already – discounting your fee in secret – so why not use the marketing advantage of a lower fee?? Doing so would solve a ton of your problems.
2. Disbelief on the part of the orthodontist
   • “I lowered my fee and my down payment”, I hear orthodontists say all the time when explaining why their practice should not be struggling. And they think this is a logical reason but if you’re selling a product for three times as much as people are willing to pay then offering half off is not useful… Think about it. It doesn’t matter what you think a good price is, it matters what people are willing to pay.
3. Terribly expensive supplies and lab bills
   • I still don’t get the crazy obsession with designer brackets, gizmos that imitate class II elastics on braces but cost 10x more (just use braces and keep the money for goodness sakes) or paying more than you have to for brackets and wires. The only thing worse than paying stoopid prices for these things is doing so when you’re struggling financially. Don’t. Stop. Now. Seriously.
   • You need to know the cost per patient for everything you need to treat the average case. It should be less than 100 dollars. Way less. If you do an RPE or something like that I will be more but you shouldn’t do this for many people in your practice – less than 10 percent is a good goal. Braces work and are cheap so use them.
   • The same goes for lab expenses.
4. A great many expensive monthly vendor subscriptions
   • I see people with many disparate and even contradictory vendor subscriptions for everything from marketing to patient interaction to contracts to financing to collections and almost anything else imaginable. I also rarely see a cohesive plan for why they have all these subscriptions. If you’re only starting 200-500 cases a year do you really need someone to enter contracts or do billing for you? At 350 starts a year that’s only 7.3 starts per week if you work 48 weeks. Do we really need a TC assistant for such low volume? Considering the AAO and JCO average orthodontic practice only collects 1.2 MM a year (and it’s generally the small practices that are struggling) does it really make sense to pay someone to do something you have plenty of time to do? Don’t you like money? Why do you insist on giving it away?
5. A weak value proposition and marketing position
   • Can you answer the question “What makes you different?” or “Why should a customer come to you for orthodontics?” without sounding like every other orthodontist or using the undefinable word “quality” and do so in a way that is appealing to the average Joe? I doubt you can and if your practice is struggling then I’m certain you cannot. This is a huge problem and a major part of why you aren’t starting cases. As I’ve said over and over, it doesn’t matter what you think it matters what consumers think. You must figure out what they want, how much they will pay and how they want to receive your services and give them that.
6. Very few case starts and the Dr. wants to make this about conversion rate
   • “My TC is doing a terrible job and my conversion rate is low and that’s why I’m struggling”, I hear all the time. Well, maybe but probably not. The reason your conversion rate sucks has to do with all of the above. Consumers just don’t want what you are selling at the price you’re offering. But the good news is that conversion rate is a dumb way to look at orthodontics anyway. The only thing that matters is the number of cases you start – the number of new patients you see to get the number of starts you want is irrelevant, or it should be. Figure out how to get more people interested in what you do, get them in the door and make what you are selling appeal to them.

The world has changed. People are not willing to pay the high prices they have in the past for orthodontics and the transparency on price across markets is increasing. This means that the downward price pressure will only increase at an increasing rate. Offering extended financing on a high fee is no longer good enough to get the starts orthodontists need in most cases. If you are starting all the cases you want then keep doing what you’re doing. If you are not it may be time to consider changing – get rid of services and fancy products you don’t need to lower your overhead for starters. Next, figure out what you are actually collecting per case and consider making that your fee. I know it sounds offensive and crazy to orthodontic ears but you’re probably doing a lower fee already so why not do it in public where it can help your product be more attractive?